Public Affairs Ireland Conference

Governance, Accountability and Financial Management in the Public Sector in

Ireland

10 November 2004

Companies, Public Authorities and the Director of Corporate

Enforcement

Paul Appleby

Director of Corporate Enforcement

Introduction

• An article of the same title was contained in “Public Affairs Ireland” in October 2003

• It is also available on www. odce. ie under Public Statements/Articles

• I will only touch briefly today on some of the issues/comments in that Article

Outline of Presentation

• Company/Public Sector Interaction

• Role/Goals/Impact of the ODCE

• Directors’ Compliance Statements

• Concluding Comments

Company/Public Sector Interaction

• Provision of goods and services by companies to public bodies or by public bodies to companies

• Companies in receipt of State/EU support

• Companies in receipt of State equity investment

• Companies owned by the State

Company/Public Sector Interaction

• Many public servants are required to:– Monitor the performance of companies in

providing goods and services– Be accountable for the use of public funds

invested in private or State companies – Act as directors of companies

Company/Public Sector Interaction

• “I suspect that many…staff are insufficiently prepared for the tasks assigned to them due to their lack of familiarity with the legal obligations imposed on companies… To the extent that this is the case, many public authorities are operating at a sub-optimal level in protecting the interests of the State and taxpayers in general.”

ODCE Goals in Company Law

• Encouraging Improved Compliance

• Uncovering Suspected Breaches

• Prosecuting Detected Offences

• Sanctioning Improper Conduct affecting Insolvent Companies

• Quality Customer Services

ODCE Role affecting Public Sector

• Compliance: ODCE Information Books to assist Company Directors, Creditors and Shareholders discharge their duties and assert their rights

• Detection: Investigation of Offences

• Sanctions: Companies, Directors and Others

• Insolvent Companies: Directors being brought to account for their stewardship of corporate assets

Initial ODCE Impact

• Quality Compliance Information Published

• > 100 Convictions of Companies/Directors, etc.

• 14 Remedial Orders against Liquidators

• Two Disqualifications

• 11 Types of Offence Prosecuted to date

• > 200 Directors restricted via Liquidator Actions

Directors’ Compliance Statements

• New Requirement in Section 45 of Companies Act 2003 • Some directors will have to report on the company’s

compliance with its ‘relevant obligations’• Issue of ODCE Consultation Paper/Guidance in July 2004• 36 submissions under consideration (two public sector)• Commencement date to be decided by Minister M. Ahern• Definitive Guidance to be available by end-2004

Directors’ Compliance Statements

• Compliance by whom?– Scope covers all public limited companies and those

private companies limited by shares with a:• turnover of more than €15.2 million, or• balance sheet total of over €7.6 million

– Currently about 7,500 companies qualify (5% of Irish-registered companies)

Directors’ Compliance Statements

• Compliance with what?– ‘Relevant obligations’ comprise tax/company law and

‘any other enactments that provide a legal framework within which the company operates and that may materially affect the company’s financial statements’.

Directors’ Compliance Statements

• Compliance – how?

• Directors must prepare a Compliance Policy Statement to:– Identify company policies vis-à-vis its ‘relevant

obligations’– Detail the procedures to secure compliance– Detail the arrangements for reviewing effectiveness

Directors’ Compliance Statements

• Directors must also prepare an Annual Compliance Statement to– Acknowledge their responsibility for compliance– Confirm that procedures are in place and, if not, why– Confirm that effectiveness has been reviewed and, if

not, why– Specify that they have used all reasonable endeavours

to secure compliance and, if not, why

Directors’ Compliance Statements

• Both Directors’ Statements must be included in the annual Directors’ Report to shareholders

• Audit Committee (if any) must determine if the Annual Statement is in accordance with law, etc.

• Auditors’ Report must state if the Statements are ‘fair and reasonable’

Directors’ Compliance Statements

• Implications for Directors– Obligation to comply with the law is unchanged – Onus on directors to take responsibility for compliance– A ‘self-assessment’ regime – ‘comply or explain’– Offences limited to failure to prepare the Statements or

failure to include them in the Directors’ Report when required or knowingly/recklessly making materially false Statements

Directors’ Compliance Statements

• Implications for Public Bodies– Company compliance performance should improve– Limited or Qualified Statements may identify risks– Need to examine what the implications will be for their

regulatory focus and activity– Detected failures to prepare, or the making of false or

reckless, Statements should be referred to the ODCE

Concluding Comments

• ‘Joined-up Government’– ODCE information/compliance work is supporting

public bodies in discharging their duties vis-à-vis companies

– Information-sharing between ODCE/public bodies is helping to detect wrongdoing to our mutual benefit

– Compliance Statement obligations will have a horizontal impact supporting compliance with law

Concluding Comments• Better Compliance/Balanced Regulation protects:

– The public from fraud and misconduct– Employees, traders and suppliers from irresponsible

conduct– State revenue and the taxpayer’s interest– Investors and credit institutions from bad debts– Legitimate business from fraud-based competition– Personal and Corporate Reputation

Concluding Comments

• State dogged by past ‘culture of non-compliance’

• Need to generate a ‘virtuous circle of compliance’

• ‘Win-win’ situation possible with benefits such as:– improved market conduct– lower enterprise risks– reduced costs of oversight and regulation – better international reputation

Thank You

Further Information is available from

www. odce. ie